TMTPost -- Alibaba Group’s management vows to continue investing in artificial intelligence (AI), treating it as “the most powerful” driver for business growth.

Credit：Alibaba Cloud

Alibaba will continue to invest in two areas: the first, to accelerate our core businesses’ growth, and second, to maintain leadership in fundamental technologies and innovation, including AI, Alibaba Chairman Joe Tsai and Chief Executive Officer (CEO) Eddie Wu said in their first public letter to shareholders with the new role at the senior management.

The fiscal year ended March 31, 2024 witnessed Alibaba made several pivots toward strategic clarity, which has helped it to define its two important strategic business direction--User First and focus on AI as “the single most powerful element that will change and accelerate the growth of our businesses”, Tsai and Wu wrote in the letter.

They hailed AI as a catalyst that has re-ignited Alibaba’s startup passion and imagination, and noted all of use cases of its businesses can use AI applications to unleash powerful value, and the deployment of AI will increase demand for computing and drive growth for Alibaba Cloud. They stressed significance of accelerate AI development. “AI will not be a threat but will herald in massive opportunities as the driver for breakthrough user experience and business models. If we don't keep up with the constant and marvelous improvements that AI is showing us on a daily basis, we will be displaced,” they cautioned.

Tsai and Wu showcased huge potential that Alibaba’s investment in AI can bring about. Alibaba intends to explore  the potential of machine intelligence to achieve artificial general intelligence (AGI) and the way to push toward AGI is large language model (LLM), which requires massive investment in infrastructure and development can only be taken on by large tech companies that generate substantial free cash flows from their core business, they said. With the market-leading proprietary, Tongyi  Qwen, Alibaba will continue to invest in LLM and other AI innovations to push the limits of machine intelligence, so as to help humankind to achieve AGI in the future, according to the letter.

Tsai and Wu believe that investment in LLMs drives the growth of Alibaba’s cloud computing business as the training and usage of LLMs in development or inference will require computing resources. They see limitless possibilities for AI to drive Alibaba’s User First strategy, since user experience within its multitude of consumer use cases can be transformed with AI applications, from shopping recommendations to virtual showrooms to personal assistants.

Alibaba reported earlier this month mixed financial results in the quarter ended March.  Revenue increased 7% year-over-year (YoY) to RMB221.87 billion (US$30.73 billion), beating analysts' estimates, while the non-GAAP diluted earnings per American depositary share (ADS) of RMB10.14 fell short of projection with  a 5% YoY decrease.

Alibaba said its core public cloud offerings, which include products such as elastic compute, database and AI products, recorded double-digit YoY growth in revenue, and AI-related revenue increased triple-digit YoY. Overall revenue of Alibaba Cloud excluding Alibaba-consolidated subsidiaries decreased slightly YoY as the company transitioned away from low-margin project-based revenues.The company expected the strong revenue growth in public cloud and AI-related products will offset the impact of the roll-off of project-based revenues.

Alibaba will deeply integrate its Tongyi LLM with other advanced AI infrastructure to realize synergies and optimization across software and hardware,  CEO Wu told analysts at an earnings call. “We are confident that Alibaba Cloud's revenue, including -- excluding internal customers, will return to double-digit growth in the second half of the 2025 fiscal year,” said Wu.